Tesla (TSLA) 24 Jul 192019 Q2 Earnings call transcript

Good day, ladies and gentlemen and thank you for your patience.

You've joined the Tesla Q2 2019 Financial Results and Q&A Webcast. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder this conference may be recorded.

to of call Investor like host, to now Director Senior Relations, would turn over the your I Martin Viecha. begin. may you Sir,

Thank of XXXX and to Steven; JB Straubel, today you, everyone, and Musk, a welcome a Kirkhorn, and number by good Elon Tesla's executives. webcast. Q&A afternoon, quarter Zachary I'm other joined second lot,

the QX update letter the results Time Pacific in webcast. were Our this published announced same at PM as at about X:XX link we

and Actual we make based materially, call discuss filings results number will and including the a comments and business outlook of could to statements. this are recent uncertainties, forward-looking with SEC. During those on expectations our These as events differ predictions in our mentioned due most risks of and today. or our

portion please Instructions.] to the limit up. one of and During call, yourself follow today’s question one [Operator question-and-answer

Elon jump we into before But some Q&A, Elon? opening remarks. has

Thank you.

than sometimes team with for complex an that proud which we do of quarter vehicles, supply is mean XX,XXX hard last last in year. increase XX% perspective, have record a the in just compared when appreciate I I'm deliveries chain, is. difficult delivered second that. So to for Tesla a being how that able of double manufactured large the for incredibly quarter to put To a it's people more it's Tesla. item you nearly to

fastest that complex I think large the this level possibly any be of growth item might in has is manufactured grown history. unprecedented,

future for years great level. XX% expect to to that at we achieve think, -- to growth I team several really the in outcome, just, by work come XXX% Tesla the So to continue and at

that like grow not quarters [ph] it’s the at how well – appreciated that's to generally rate. So

high progress hard the of So at the deliveries important work rapid and And entire and Tesla all this thanks record managing -- number to as tremendous team. it achieved, made was delivery said, in our shows operations logistics volume. I the is we've global milestone achieving an of

This all premium Model gas-powered approaching was competitors, premium combined. once established Euro Europe, from best-selling In outselling its of rating in is overall again U.S., achieving is of the the X equivalents five-star U.S. and was X including X of NCAP the from this and it sales Model and levels five a probability receiving vehicle every subcategory awarded month. its vehicle in Model an addition of five-star in category to injury ever tested. the earlier earning any stars in rating and lowest NHTSA

vehicle recently their they also all XX-year in other Trend across Motor selected have S the best ever as history tested cars. Model

is is ever most Trend which This despite say that their in integrity. award. Trend, entire Motor vehicles, they Year Motor their evaluating not Model the So, Trend, in vehicle think arguably any coveted is the That's of best the that history have incredible they authority evaluated. advertising pretty the special. is in Tesla It's leading speaks Motor to journalistic something would S Car I buying and XX-year it the

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Model and of updates new issued X made dozens added safer, that software features. improvements and numerous also We’ve have and faster, Model S

S X, the for and Model like hardware full Just Model needed capability. self-driving have future X

service. to we and year our the into we on look manufacturing new and As the rest continuing improve operations of XXXX, vehicle focused launching expanding to energy programs remain ahead customer further and

volume installation to to photos the quarterly is local out be production of -- equipment of end this Xs Shanghai. the will our on expansion being remain international cost expect year, as the in letter, from you we By can it there because see focused Gigafactory well. is we progressing in We essential producing And competitive. Model

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cognitive evolve we linear, expanding at rate. only level. exponential But exponential understand feel can exponential, an didn’t we at So, to feel an an Tesla but we could a is

I deliveries, the year-over-year it's cumulative in if exponential the Tesla seen. look ever deliveries fact, graph cumulative cleanest at chart have And like about you

So, results I pretty will and obviously, think that going if continue. be amazing I think continues, that trend to are

the like quite can able -- not we've if considerably difficult. better year, as you to doubling way every scales a because that total going is in we're we're that's if service standpoint, been difficult with scale needs So, to fleet from scale. quite total new just service service a -- our fleet scale. And to as service obviously, scales, and really cost a -- service that It's improve but imagine managing is it to of production a sensible kind challenge a bit

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of be XXX,XXX. to between XXX,XXX deliveries, And then expect deliveries in and terms we

to than higher be and production number number higher a expect demand be slightly that. We to than that, a slightly

numbers. three actually often people production, So, orders confuse for Tesla, and and deliveries, they're different

kind So lot kind demand get you meet so in than sense of more make, move then of it generation obviously and make together demand like production more yes, make the And -- and we generation typically deliver deliver. effort demand to into activities you to with than put the cannot a likewise. of will can't we if doesn't like production

increase we time like like address production few solve exponential demand, seen, actual is, the and cumulative curve it production, demand. So, a look it’s you deliveries may I issues, then up ever okay, a and say over what Tesla, then the [ph]. in extrapolate just -- to demand, increase I you've need at and the for increase details we'll then get lot, if said but look caught cleanest results, that at the happened

in Tesla, share we'll the coming So, about months. excited have more and trend [ph] to at a there's and lot to be weeks

Zach to is say there you'd anything our like results? about

with things want made. and moving QX We've I'm progress few of and Thanks to achieved the vehicle into strong corresponding a before reduced other record I team proud for the sure. for Tesla. record Elon. we've A was Q&A. services record a loss. highlight and storage Overall, deployment, the production production delivery, Yes quarter extremely revenue

we've times, and higher stabilized for the adjusting regulatory in margin every we aspect revenue. we the volumes, delivery and impact As of credit a nearly business gross few operations improvement at international of saw mentioned logistics

is free these to partially cash of flows result which benefits. a again once capital achieved accomplishments, attributed we strong only As working

successfully equivalents, cash the billion we billion also our history. $X.X Thus, in $X exited May. cash in with in proceeds roughly highest We in raised the and net quarter

loss due QX million to efficiencies. things net we operating $XXX and $XX foreign expenses to restructuring. related is for entirely higher had which our progress lumpy. This few saw we on reduction note. And in of regulatory by significantly reduced inherently A cost volumes line, aided We million sequential exchange, credit, other within nearly is relative a million hedge. Our $XXX don't to to reduction. There's which a income

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applied powertrain and impacted prior and ASPs upgrades our actions S X, Model and were to QX. delivered built Model to vehicles inventory were For sold pricing majority of the of the in launch by of April, which in suspension

global profit of X success gross efforts. a the our per X, Model representing Model the yet management during ASPs at For reduction, quarter roughly sequential stabilized continued $XX,XXX, improved cost

will continue revenue in upon we of self-driving, future be that the of Note periods defer to associated release recognized features. portion with additional full a which significant

quarter, appear operating the of expenses focus that's processes. the not continues reflecting to technologies unnaturally reflect expenses our our operating case. ability to scale on these and net improve low the volume, expenses, restructuring improving be in to on capital immense continued and this while despite efficiency And cost Operating may well as increases Rather efficiency. core progress and

it's a full both it's committed and would the quarter-to-quarter. here, our journey important on If we Tesla We back long-term that remember see and a think take product industry a business. X be transformative difficult that I picture is looking to for step to Model the

ago, X. the market. Two build years year X to the Three to One at we the demonstrated ago, our we years brought product high we Model rate. ability unveiled ago, Model

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our this thus backlog ahead in QX. point were of QX over QX. noted the our increased And delivery far our order release, at pacing in is order of we production And where course we QX, as in and

to broken generate is X managed appropriately sales our it our base, Model to cash business. is to Model cost we the do. enabling reinvest. critically and customer business because feel running us the reduced the Ultimately, we've expanded have of process, It the our the expenses need we've This operating what enabled In and needs of accomplishing business. I as X cost by the though fixed success through baseline a important barrier,

on yet. be the and should focus With months XX exciting to next cost most XX execution continued management, the

addressing production, During most producing at the in Shanghai be Model this time, will segment. will we believe Y that Gigafactory, popular vehicle scale. be

Our European Gigafactory will be underway. well

autonomous and things feature will develop; driving products to suite will business energy along few the continue other Our a grow maybe way.

set there's any and while fast can grow large intent And afford in risk to ambitious of is our as projects, and to. we invest inherent as

across we we noted, cash phase I've as of have stabilization believe the growth. this shape we're With hand Model the of for key next areas and great on the X in

very you Thank much.

Now let's taking start questions. first some

Sorry about that.

ahead. Sorry. Go

Yes.

Okay.

Technology his update So, is transitioning that Tesla. our Chief for and be taking CTO Baglino Drew thank Senior be Officer will a an I'd to Straubel, you, like JB of most Thank JB. role important creating JB over from JB's role; building the responsibilities. in and Co-founder Advisor will fundamental to and

Thanks, Elon.

exist Tesla basically. we If lunch had wouldn't hadn't XXXX, in

adventure, been yeah, been years. It's an quite – it's XX

But you reason Harold Yeah. [indiscernible]. Rosen lunch exists. the Tesla That's with and

some And remember will. I'm that the I confidence bit not like make in I of a that love always company it lack and team maybe the that, that. to this love want I or people just team. to just sure more disappearing, understand to the well. the not add I company and or is I anything

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closely. big Obviously, working to been have we fill shoes but JB,

fact, this about project and all back – XXXX in In already we've talking been along

well? as XXXX You guys back talked in

Yes.

Well, XXXX was a good year.

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Okay.

you, help do to like, growth about was to excited and get feel as the up let's this that myself I where team. about that I feel whole how know of But and project. I are we that we're we well the need you – from we set ahead us, exactly very

Yeah.

And help some our where all core to I of I'm and stay technologies, can. in excited involved that

executive of operational, less role. in Just type an less not an obviously –

thanks Sounds well. Drew role JB, this and good. as in Well, integral again for creating your company

cool that's about you So year. right XXXX, talking in it it the guys were like sounds

year. Good

year. Good

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Yeah. They did some work. pioneering

Yeah.

some we have can now? questions So,

very you Thank much.

some have from shareholders we first shed you is on it cost lowering supply questions light us Can And So, first if our some retail supply has constrained. Tesla car Tesla constrained, been is, help from the that question not stated constrained? say.com. demand is is why

Obviously, for There's things somebody of money to value it affordability. -- and to here. how good the the how a really The does buy much enough there's simply consider the doesn't matter have not value There's demand. key Sure. -- for if then there's two value money for dimensions money is. car, number

can if somebody not for infinite buy the simply value You have does get have funds it. money can't car, they the to

is to like there's but our of have to there's think people – to amount cannot. they just they buy money desire two. don’t very cars, obviously this parse enough So, them, And buy I those important tremendous

our cars the more expiry. we expensive credit almost cars the partial make affordable. expiry like $X,XXX U.S., with the more in X So, July or of on have to Actually, tax the got

$X,XXX. actually Model And yes, Standard we Plus or the $X,XXX dropped the by by price -- only of Range X

got base actually more Model a the X compromise. like reasonable expensive, a seemed $X,XXX which So,

you just So -- that's if like, charge price. any feel sort like, sometimes absurd cannot you we notions high, tremendous this of can just having actually any pretty it’s charge price,

I more think affordable a cars making is the fundamentally also of transformation. our part

to is anything you want yes, add? there So,

agree Model that adjustments is completely. Yes. I the were generally I'll speaking, more than our X add that, cars the Standard slightly the to lineup, that. Plus. I'll higher [ph] just add within pricing for What trim for

So, so but orders, see the ASP extent as mix move more on the the the is towards we expectation to the trim how we'll offsetting adjustments pricing higher this some in some – plays of data changes. our from take that will out

pricing we so And one sales, as a adjustments identify other those some of on thing focusing that, I'll that add strategy. reflect markets couple and some is to elements well and are target of our of our of

be Yes. Essentially, like, we few a the expect average selling same within prices points. percentage to

correct. That's

Yes.

around into we noted was the as good it and even in course ASP, ASPs based we of roughly visibility order -- on the Generally, letter, are over the $XX,XXX, where on going quarter, have stabilized data.

So us our to be. ASPs where as will to gives two of recognized one lead months that actual

that. will progress of to continue result X of And our expect the some would so, some offset this Model as change, pricing cost adjustment I efficiencies. a trim mix ASPs great make And but to we on

expectation our grow. overall to is will in that that X so, Model continue And gross margin the

Yes.

important self-driving is just – full like the On are have calculation, margin full – out. the of rolled part a features self-driving and is the them portion the margin for point, of gross only an extremely

revenue self-driving full until those is demand the current. out first because self-driving for full limited features is roll limited features on instead mostly also So, are prospective the of and recognition option the at package the

match recognition the I full well But rate roll the increase product. as to the to the those features take self-driving would of -- for as self-driving full significantly for recognition out, as expect roll out revenue obviously

increase to So, factoring really mid-August, and which yes, margin that the compelling self-driving $X,XXX number in in over is time. time the gross be quite will over full will option accounted when

much. Thank you very

of and us Investor provide closely implications. when be on Day technology about excited you this detail who covered? Battery more us question be are Can Powertrain incredibly is follow its and second many will will and any Tesla The what

terawatt-hour The a six think February like is chemistry, comprehensive for maybe Battery of pack, to module and months a Day, tell manufacturing roadmap I Yes, probably per this March we're has or plan a a about architecture, do [ph]. show year, year. and to going for cell clear next review time and that

stated question personal has you are receiving done the owners to-date us you XXXX. next you QX all been customer was ensure industry-leading to that experience? customer for earnings on XXXX call update very Can is what that a an Thank priority much. service Great. The on

Sure. get like, vehicle services. quality and eliminate multiple just with a service I good goal the and meet that daily main week of team the times is the of no That's the need so on being -- what service for the like is the service. reliability updates That's best vehicle. We rarely required. service is reliability the course

we're as the of Mobile opened this that increase more have fast terms already resources, as locations this -- increase increasing course service center initially Service. in service through and service as will to dramatically opening of opening XX of well and new the service can Then we will rate centers quarter year as

Mobile Service that hard we you because is the like just and convenience. great, come are, to you beat fix wherever for car to really that's and it's

to for centers. want delivery, and-- vast cost service -- you -- how global Hey, For we've logistics Jerome parts to do we manage made improvements the service Jerome -- getting service

you the pointed as no service is service. out, Yes, best

the most to and are from continue and the So, required and this visits we're cars fewer we're recent service the quality that cars daily fewer track building. trying of improving

trend good So, we're on there. a

the way. parts, -- increase we that don't accelerate service more also same We we Besides and factory. and already cars much of on still day improvements centers to to we have everything to lot and a so people parts we need service more lot making a that the work pretty finish that, we've There's fewer cars are ship the for capacity. and wait many the for in all implemented

team. happy relatively and to am I'm service the I optimistic help So, with

heads with and helpful, about the week, the service for of questions visits last of lot production was services U.S. had factory car how software and it closed like example, a loop We regional and... the team. the on with And service just a to at Yes. use and just are incredibly

one is, to the And Autopilot how it's test. visit number use

there bit helps. education of yes, So, a

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Yes.

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yes, better are to load. on bunch on. things it do elementary providing you just turn interface usually whole user And that reduce service of and quite So feedback how a

hours question constrained? XX April, Okay. the XX-gigawatt The to theoretical is efficiency capacity. increase plans theoretical Tesla been cell about And this out still the one in near-term is; had Are there any Has of capacity? improved next Gigafactory yet? plant’s of

Drew?

We number. hour seen the with have now the in not... XX-gigawatt improvements trajectory continuing upward. XXs in We're high the We're

So about XX-ish?

at Yes activities XX-ish. I for we're constrained not so of our the would say, moment. any

volume ramp Cell matching the approximately production is rate.

Yes.

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Nothing just distribution a major. warehouse. It's

optimizing we're everything nothing real estate to there. one Yes, roof, the conciliate cost, reduce under the trying there’s special

queue Okay. the Latif, Thank much. the on can question very you Q&A call. start we

Yes sir.

the question first Our Dan comes line Research. Wolfe from Galves of of

open. Your line is

on much questions, Hey, on thanks the headlines the $X I'm cash some very halfway sheet. billion tomorrow Tesla's taking to of for balance expecting too much cash got and number, seeing the congrats

if you Model We in update delivery for could China have the volumes wondering us what moment. sense was I a X on at of great Gigafactory China. don't are

you or What week and order that X,XXX seen type X,XXX Some are that demand can that per you gives maybe you demand terms get a confidence around in you to product pricing local have in market? at of of per flow announced sources since X,XXX month.

week. like price is Gigafactory, Greater it's about, it's long-term much think what demand region? detailed plans, do Shanghai X is I think from in are asking think X,XXX you too actually I about talk China for but the Model about long-term don't we Yes, demand I -- a like

to from all? Okay. considered cars And Europe you sounds plant have good. potentially that sourcing China -- at And

No.

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my taking for questions. Thanks Okay.

go Thank you. We’ll next to question please. the

question comes Bernstein. of next Sacconaghi line the Our of from Toni

Your line is open.

in you Yes, saw thank QX you the a Model the in in by from you that consumers out of can the least ask sort like quarter benefited I about X sort that XX% buy tax comment it QX. of of of your normalized sales. the phenomenon percentage you. wondering in higher reason U.S., I sold the And were U. advance S. at U.S. my is rushing of whether maybe credit, declining was part looks is, sort of of analysis X to which felt than if Model federal in the

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far, Yeah, I has It exceed -- QX thus QX. demand think in of will acceleration some think we'll see that. I and we'll

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step is X just why can Model sort the and or you demand if S seen there I'm to could for having any on – in If what that. that years? cannibalization you last a Okay. we’ve Elon, wondering, impact over structural why think relative delivery be levels I sales or X Thank else and of believe comment the on or follow-up. five down you six might you whether

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you Thank much. Okay. very

to go question. the next Let’s

of Next from question Deutsche Bank. Emmanuel comes Rosner

Your open. is line

for Hey, Emmanuel. it's Edison on

X. X out on S the know guidance, question kind was and of target previously there first on Just and Model XX% a there of I

the wondering suggesting Just implications with the today's year play longer that what is that updated are in or that's of no update? for is one kind the

factor you self-driving option. the in if Well, full

the this to done, in Since fleet he self-driving. I has There's also out, – full year. on make sure yet. increase the get existing to they roll rate a play them the think are significant features there's recognize full for We fleet, self-driving. the seem mostly upgrade and existing purchased to for it revenue and take great, the not opportunity very option is

a of to there's existing self-driving, significant to full fleet margin fleet most the upgrade which potential can. So the for

absolutely, term think Not XX%, term I of is quite yes, gross long term, likely. we I like, terms Long year. margin that XX% vernacular XX%. long think, So, like meaning a like in talking are

Yes.

saw We record continue in attributed our And we an from costs Model gross that week efforts X on the can Model every to lows -- are on of and to out every the the X But well yet QX, on to to take particular significant adjustment, vehicle. we content QX further the ASP had underway. vehicle nearly build the as comment this. reduction week labor expanded, profit net cost reduction in Jerome

than quarter. saw cost more year. every one Yes, reduction progressing in XX% Labor it's

just I see quarter-over-quarter. to labor Yes. want, the like, what were hours

in Reduced fact spares, it's reduced QX is year-over-year. also year, -- just for Yes. with since reduced much yes, Spares nothing, last pretty than half, the to the XX% associated but all scrap that's the the are more half.

records So everyday, And -- beat most and week more our every the on goal is affordable to car lines. pushing we'll make we're sort of yes.

Yes.

we the of And and in have terms of that in had past. level and dynamic yes. output -- not cost not I per have unit, fiscal discipline We're in very good

Agreed, yes.

financial the like think, So, better in I like, times Jerome's think Tesla's core words, past. to fiscal standpoint, just for than a is discipline echo I dramatically I'd like, health

Thank you.

the of from JMP line Our next question Joseph comes Securities. of Osha

Your open. line is

and fact shift the reconfigure there about? is that your that And bit? the of single Listen talk X here I'm mix and there -- to S you're a something you're running some facilities Hello, you floor Fremont, thinking about maybe hello. wondering potential listening that space is to in a

want and lot And up that, the that's X parts where the taken at you to… X line. space reconfiguring are parts Fremont floor for probably really Jerome, Model we're so do S, the don't of a need a warehousing, the S, space we lot quite with of putting we there's that's activity. factory Well, Y

Yes.

for We of room. the costs for since delivery we Model done we're XX%, improving last material QX of X just again year have reduced so We and lot by and ready warehousing a production S X are part making like components. X-X, some

more we're - have much parts efficient We delivery. with

production increasing helps actually. It that

that cleared which space in that’s Y it So right Model is there. out, I'm now put at stuff looking to we in Fremont, going

their if six hard say, and Yeah. way. and would have you'd visit a changing you the finding months factory from, time -- I every constantly evolving. every So It's recognizing

follow And sorry, -- as go ahead. a I'm

just efficiently been Yes, of feel and like Fremont it. is Giga which factory, the improvement down like see you you're Yes. just just both It's can it slowing like incredible. like has rate not is and

just make could by manage Model Xs X,XXX X,XXX, And then, X,XXX, end follow-on see of think? you the we as a Fremont the year in you to

Yes.

much. you Thank Okay. very

say to I there S able XX,XXX feel to mean confident -- it's being a clearly X,XXX and and in week very X,XXX is the which that Xs balance Model towards just get let's I would vehicles rough trend is of the X. be -- like to numbers that

per sort SX. numbers there's that. to but X,XXX In So, Xs, SX round more than probably a bit week, X,XXX X,XXX of X,XXX

Thank you.

question comes of from the Dan next Suisse. Levy Credit Our line from

Your is line open.

great. Thanks taking to the about wanted piece. particular non-ZEV question. I your in credits the ask for Reg Hi,

the You're but not a couple on anymore, this. questions ZEV disclosing of just piece

First about how can to cadence quarterly think we think this? -- is any there

And you're obviously this? are you've the I others looking know There's then one composition any automaker there agreed purely at. if that what's OEMs? Is to don't European going of this that with.

you having to pricing Reg extent or automakers one? sell are what lastly in to Europe with on And this willing sacrifice generate can discussions more are -- you you to to credits? other higher And volumes

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regulatory QX, And not credits, forecast As hard regulatory credits in QX, exactly. significant to to you from increase as I in model declined. you although it's expect QX saw would a that

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Great.

question, please. Next

next the from comes line Rusch question Thank of Oppenheimer. The of Colin you.

Your line is open.

How many is us the sourcing coming of per going for you how supply walk your you start -- from in batteries? is hours internally from the And China? cost what's Can ramp? externally? watt battery around come through to expectation produced much How much to as plan

battery We've talk know details of in China to Drew a I got don't don't good know. for we the the constrained self you be to expect next think? I don't if supply. on. about what want handle We do year,

plan like our now. right what that's Yes, looks

we early have year. internal next you In terms versus for we're But wait our place until next -- yes, discussion with have we say agreements good Elon. as in we of think year external, I should

you our to really like terawatt of Plan kind it's which per think Powerplant study X, year. yes for need multiple from hours reset like be like kind okay, hours Day but --, of but degree, is to – get we of any-tens I per or national Master to Battery gigawatt how probably do some will year

pretty a -- that's increase so -- in yes. scale What's dry

a there to Sort would increase. factories to get XX% bank year? so, like terawatt hours XX% gigawatt hours that. the of is What we like do Japan or how a well little So roughly to a And order like? like you XXX, X something right count you where one XX now over actually in

to about way because that's think you what to it do. you need the have That's

Exactly. world's story order not it's make terawatt fundamental to energy the shift usage future, like, not you're it is hour if things a the range transform nice but in sustainable energy changing In and it's in really energy fundamentally the equation. new to

saturation? about X guys pricing on volumes? that Obviously question around ideas be Okay. have sustainable some Model and you follow-up market have a And and can How I around should volumes we is? big thinking how Model those S

you and drop and Obviously the volumes are see from element guys a with on Model both we're that lower on Model we story a seeing some pricing S the standpoint I going of about what's planning right of think think drop sellthrough what the terms as to and numbers that's numbers core here X? in

Yes.

. -- but it's are much X probably X sexy. spell like it's S and I think and nice, they too -- and on focused The S they're we not without them couldn't

keep the sexy. main reason a reason, want spelling but So not is the reason, main to well we

main reason, X. going is the S say reason, not should a to that and I but keep a the with reason So,

demand of combined term is million my and two two of think and for for probably think. a from of XX,XXX Tesla three long is sales like to the S/X is long-term units million a like order and demand may on years I of those X.XX year. Model I sales fundamentally maybe Model X story a The so like like per Model million But year, is and be – they the X is for it's then -- year for future vehicles, guess like in quarters Y there a Year, meaning, couple XXX,XXX

gets So it's of truck but And and X% a you it smaller the truck volume just a like and in there, and semi, in X% throw or like Y. smaller. then could pickup X

standpoint, great not are they in important they’re long-term. from the products, -- So a all volume that but they're

Thank you.

please. Let’s go next the to question

next Street of The Pierre Research. question comes from New Ferragu

open. Your line is

distributions. I'd like for you Elon Hey, taking about ask thank you to question. my

it. get the like try the test -- buy to line drive a like and XXX% push model, year So car, the on if going don't they it at you made change almost an people you back of from made beginning you tried and it big guys like return on distribution to

distribution how footprints So on you mostly model? locations give online could progressing? you start new it an XX evolving retail you retail this us do is on time? update saw over like opened the I in distribution your see an you Do how quarter, becoming online see an -- so following And

locations. opened XX service we've Actually

what the really that find think good. is we I word-of-mouth for Tesla is incredibly

a piece cars that's they talk particular new in it they what all a to love customers there's and once friends drives sale. So really the their about area, of and

of retail a they itself, but by a viral grow is would like think retail needed, aren't in an locations like just not, are viral the It -- like organically are like accelerant. they an seed. you seed location It's if they area. So actually

What told needed frequently for is this I'd worldwide, sales in any and given area say

like to experience. different. convenient, have or this like five got location service be that's different a country a drive location. pretty my you've can't country Like people around it thing so the same is They the world want have service is to much in to to eight that hours

you where And price charging supercharging you place to are So, sorted got sense. our must then good all sales you to out, four consumer true, could the financing are things and and any have great. have service, have those make

centers retail the So, are we're rolling crazy. out the centers like not Service key to service locations. sales,

centers Yeah. to And our service densification point. center existing traffic customers city-by-city where of are customers we're centers our We're from on of times service service improve We're to populations in in currently those going our at mapping the looking of the which customers. reside. inclusive locations don't long, access is running population places can are get areas. working those charging areas centers have we where too as there are and and fast service have time for service to centers, We in that up the appropriate or that as underrepresented do we where to are drive driving

to and with systematically on supercharging focus out a retail very it's opposed our presence. service being So mapped as

us. incredibly important Yeah. Supercharging to is

of fundamental take, You to freedom like freedom routes, it the product. really of can't XXX% car to it's a somebody the you XX% routes like have wants travel, of need –impairs the travel, a value is anything just that who inhibits

All perceived.

real exactly, travel. freedom of all perceived Yeah,

Thank you.

question go Let's please. to the next

Capital Our from Spak RBC next of Markets. Joseph question comes

Your question please.

Thanks.

margin. self-driving for So, Elon you mentioned the importance gross of full

to of Do a plan also to And China? the tougher they've expect able the you I You've bit self-driving also on U.S. importance you be little suite the where full in in offer guess, even that and regulating? offer mentioned to Europe, China. been

bit expect It's everywhere full ago because from to some just able that self-driving and technical regulatory we EU, get the committee just changed. It's other be in approvals offer work place just need a through all not than to standpoint, it rules a regulatory that years except longer were it's very actually be take to places. to needs we doable changed. put committees but rules to Yeah, – there's the just

of public. think, can access to they have we'll of will customers the see rules day, full in self-driving. I at But have answer our pressure the And a to I think end the Europe these from lot regulators the changed, to so

those thing And just quite as present that's rules rules. when temporary think not to a and I drafted. just specific the – So to really EU we're were it's

of to – making they're to we just sense, why got that's So them. process work got ton change place. to But through a put in but the

to know, Okay. owners. service grow? you some of a parts is And There's then been And frustration guess the question second increasing and you you corresponding number fleet mentioned with you've parts the as availability capital dealership continues do growing I working availability how I commitment mentioned think that always plan times. the model, required be issued on without would but the you

all a the service make I where service to are go warehouses, the the it just kind is kind like supermarket. – go to to parts taking you them just there of think bunch on parts a have with grab know, can the that of just Puffs the thing sense and wall, the were stored are like and And and centers. you you in know, just actually the It's Cocoa replenish you of and shelves where eat the that moving it's centers and Like, parts. always the just

the on of all used on basically centers. are the what weeks There's to, more frequently definitely, take And like, you applied off the ordering and put no service, the to generally want sort service get which the like parts, putting merely hour, that than of, tray same-day parts -- to shelf so it go service. on walls we're same on just not Really car. it but six

a significant Yes. And service we working of the it's at actually amount this, service not piece specifically challenge the of capital is, parts on just centers. inventory. The have

Yes.

service to the of experienced center. we get from center And the lag that the part the distribution is have so a to is, lot

might And don't be parts don't to store parts, reverse, the actually many company. be moving -- drain large by on we that by where expect so the need I working localizing capital It eventually. as a the to

-- we're if silly sending last just made distribution that directly they I they're internally parts, them in they’re team like them the here, them was at said, trip, I fact yes. the instead is if a outlets. to that obviously, China, the my just there like, center, from if like go anything was fix. doing when at a should It's having actually we service And Yes. -- make And, in of we China bunch of having supplier, or made through

the please New end Well, made require across up are and we several and like -- literally just basically no China. of the in yes, parts China And stop Jersey ship you road. a just have -- then things could replacement like company always And lot like, problem. that yes, we if them back for what as is shipping doing XX,XXX things. happen a of then needed crazy that and them then It's literally if to improvement. There's like you're -- person silly to

business of the perspective. easier localization, distribution past like lot economics in sense. more company was increases, of things the the parts when cost centers a smaller Whereas centralized from And make as having the the scale a of was

processes re-stabilize growing is a has continue so mentioned, company systems ourselves to the because -- of on business and new we volume. plateau redesign as the fast, have to So Elon to

Yes.

need we'll rebuild then, we'll and again And grow to those processes.

Tesla I Yes. and the is integrated is some volume all that everything. that made way product mean, of things service and through charge only sales the fully company

just need would at system if say it we limit, maximize really was auto and efficiency the in economic to the how the So efficiency. we look industry, Tesla do total to

the we of optimization, we're -- to as than scale. can industry. got that achieve kind better economic confident we And like greater the recalculate that's rest auto fundamentally I'm a achieve of efficiency

you. Thank

the for have all we that's time Unfortunately, today. Okay.

you for So thank the you. and in all three we'll you speak to Thank so your much months. questions again next

your Ladies conference. Thank you does today's participation. this and for conclude gentlemen,

time. at this You may disconnect your lines